Court Rules That Shadowing Dad at Work Might Require Payment

Shadow - Trainee or Employee  death-2577486_1280In the 1930s, the popular radio program The Shadow featured an invisible avenger who possessed “the mysterious power to cloud men’s minds, so they could not see him.” (He supposedly picked up this power in East Asia, which must have seemed mysterious in an era before Kung Pao Chicken was widely available.)

Eighty years later, “shadowing” has a different meaning. An unpaid trainee follows around a more experienced employee as a way to learn the business. Few trainees have mastered the power of invisibility [Note: only the best ones have, and they’re hard to find … ba-dum-bum], and often the nature of being a trainee involves getting in the way of the real work.

Scott Axel was a trainee who shadowed his father at an automobile wholesaler in Florida. He had no expectation of pay, and the business said it would not hire him. As a favor to his dad, the business let him learn the business by shadowing his dad.

Returning the favor, Scott then sued the wholesaler, claiming it failed to pay him minimum wage.

Dumb claim, right? Loser! (The claim, I mean, ahem.)

Anyway, a federal court of appeals was not so sure and ruled that it was a close call whether he was an employee or an unpaid trainee. Scott, apparently, had the mysterious power to cloud judges’ minds.

For much of the time, Scott just did work that his dad was doing, under his dad’s supervision. If that was all he did, though, the case probably would have been tossed out.

The company’s mistake was allowing Scott to do some wholesaling work that his father did not do, which arguably displaced a worker who would have performed the work if it were not for our hero. Scott posted vehicles on eBay and Craigslist, working under the direction of others, and he received a disciplinary warning for spending too much money on the listings. Scott testified that he spent more time on these tasks than on shadowing his dad.

The Appeals Court evaluated the case using a test for whether an unpaid trainee should be paid. The test is meant for educational internships and did not neatly fit the circumstances, so the court admittedly struggled with the analysis.

Ultimately, the Court decided it needed more information about how much time Scott spent performing the various tasks. The case was sent back to the lower court.

The lesson here for businesses who allow shadowing is to remember what a shadow is.  A shadow follows someone around.  A shadow does not do independent, productive work. (Except here.)

While there were several factors in this case that supported Scott being an unpaid trainee, too much gray area remained.

So what happens next?  The lower court might allow further briefing or might send the case to trial. Did the business do anything wrong? The ultimate question brings to mind the introduction from the radio program of long ago: “Who knows what evil lurks in the hearts of men? The Shadow knows!

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Can an Intern be an Independent Contractor? (Answers revealed in James Bond movies)

IMG_1068Among James Bond films, Rotten Tomatoes ranks Never Say Never Again 18th out of 26, with a mediocre 63% rating. (Bond movie quiz at the end of this post, for patient readers.)

It’s a cliche saying, I know, but my first reaction when asked this question was, “I’d never say never, but it’s hard to imagine a scenario where that would work.” (That was also my second reaction and my third. Let’s just say that’s my reaction.)

Let’s run this through the gauntlet. Remember, it’s not your choice whether an intern is an independent contractor or an employee. The law decides that for you, based on the nature of the relationship.

Test #1: Economic Realities Test. Under federal wage and hour laws, an independent Continue reading

Unpaid Internships: Six Tips For Avoiding Minimum Wage Requirements

student unpaid internship frog-1339892_1920It’s summer intern hiring season. Can your interns be unpaid? If you pay them something, can you pay a small stipend that amounts to less than minimum wage?

Wage and hour laws dictate when a summer intern must be paid like a regular employee, with a required minimum wage and eligibility for overtime. Seasonal amusement and recreational establishments (such as summer camps or some amusement parks) may qualify for a special exemption, but this post is focused on more conventional year-round businesses.

Here are six tips for maintaining unpaid internship status: Continue reading

Are You Protecting Confidential Information When Using Independent Contractors? Try These 2 Tips.

confidential information - independent contractors - top-secret-1076813_1920Do your independent contractors have access to confidential information?  Does your independent contractor agreement provide you with sufficient protection?

Tip #1: Be sure your independent contractor agreement includes a Confidential Information section. It should prohibit the contractor from using or disclosing confidential information at any time, including after the retention is completed.

Be sure, however, to consider these carve-outs to allow disclosure under these limited circumstances:

  1. When a subpoena or court order requires, but consider requiring the contractor to provide advance notice so you have the opportunity to contest the potential disclosure.
  2. To a government agency, as part of a complaint or investigation. The SEC and DOL/OSHA have taken the position that it is a violation of federal whistleblower laws to have a Confidential Information clause that is so broad that it prohibits revealing confidential information to a government agency when whistleblowing. Under this whistleblowing scenario, you cannot require the individual to alert you to the disclosure first.
  3. Under circumstances described in the Defend Trade Secrets Act (DTSA), which took effect in 2016. Under DTSA, a company can recover additional damages and attorney fees if an individual improperly discloses the company’s trade secrets if the company provides advance notice to individuals of their DTSA rights.

Here is a sample DTSA disclosure:

You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (x) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law. You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Furthermore, in the event you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney and use the trade secret information in the court proceeding, if you file any document containing the trade secret under seal and do not disclose the trade secret, except pursuant to court order.

Tip #2: One other point to remember — and this is a common mistake: Make sure that when the agreement expires, the obligation not to disclose confidential information remains in effect. I have seen too many termination clauses where the agreement terminates, not just the relationship. If the entire agreement terminates, you may accidentally be terminating the contractor’s obligation to preserve confidential information after the engagement ends.

When you end an engagement, you probably want to terminate the engagement, not the entire agreement.

Have fun out there!

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.